Shift to Industry 4.0: Separate Myth from Reality

Over time, strong growth periods have always been characterized by major revolutions, particularly in the manufacturing industry.

Whether it’s called manufacturing 4.0, industry 4.0, digital transformation or smart manufacturing, the most recent industrial revolution provides Quebec businesses with a multitude of opportunities… until 5.0 makes its appearance. Industry 4.0 is not an end in and of itself, it’s an evolution to increase competitiveness and maintain added value in the marketplace.

Considered to be the fourth industrial revolution, following mechanization, mass production in the 19th century and production automation in the 20th century, industry 4.0 integrates digital technologies into the manufacturing process.

Undertaking the digital shift can provide numerous benefits to businesses, from improved process agility and data usage to cost reductions. It may even become a necessity to remain competitive and maintain business relationships with clients.

Entrepreneurs who want to undertake this shift are often hindered from doing so because of myths or concerns they’ve heard that impact how they perceive such a project. Here are some of them.

Myth no. 1: integrating 4.0 is an intimidating task

What you hear:Many of the entrepreneurs we meet tell us they’re uncertain about undertaking the digital shift because, in their minds, it’s a colossal task. Despite its advantages, the process seems arduous because of the major changes involved, the significant investments in time and money required in the short term and because the overall transformation process is misunderstood.

What you should know:The biggest mistake you can make in a digital shift is wanting to do it all at once, as this often leads to failure. The transformation must be carefully prepared, with each step progressively planned. Conducting an in-depth analysis of the company with an industry 4.0 audit and reviewing the objectives provide a clearer understanding of the projects to be implemented in an industry 4.0 transformation. This analysis will also help define a project hierarchy to capitalize on the results and impact of each step and ensure greater control by spreading costs over time. This action plan will maximize the return on the investments in the medium term.

Myth no.2: Industry 4.0 only applies to technology

What you hear:While the foundation of the fourth industrial revolution may be the connectivity of data and objects, technology is not the only consideration in such a transformation.

What you should know:The digital shift impacts a business’s entire value chain progressively and has major repercussions on many factors:

Service delivery and product manufacturing processes;

Cross-border tax;

Commodity taxes;

Client and supplier relationship
management;

Innovation and technological
development financing;

Performance indicators;

Business financing;

Business processes;

Skill sets required;

Etc.

What you should do:As with any industrial transformation, the digital transformation must be part of a strategically thought-out corporate project and rigorous deployment and monitoring process. Industry 4.0 applies to management, tax and financing as well as technology.

Myth no. 3: Industry 4.0 involves artificial intelligence

What you hear:In recent months, industry 4.0 and artificial intelligence (AI) have been talked about in various media and may even be mistaken for each other. On a scale of maturity, AI is the highest use of data within an organization that serves to automate decisions and processes, among others.

What you should know:It’s important to understand that you don’t necessarily need to use AI to reap the benefits of industry 4.0. There are various ways to exploit data, depending on operating maturity, that will provide significant added value. These include:

Descriptive analysis: observing what has happened;

Diagnostic analysis: understanding what has happened;

Predictive analysis: predicting what will happen.

What you should do:An analysis of your data will help determine the value to be derived from applying these data to optimize your activities.

Myth no. 4: The 4.0 revolution is the answer to labour shortage

What you hear:Some business owners undertake this process in the belief that automating certain processes will provide the same results with fewer resources and help resolve the labour shortage problem.

What you should know:Automation will certainly change processes and procedures and may lead to some job cuts. However, it will not make jobs per se disappear—rather, it will change the nature of the work. Tomorrow’s worker will have a different profile. New positions will be created and new skills developed. Businesses will have a number of challenges to meet. The organizational structure will have to be reviewed to reflect new needs and employees trained so they can grow in their roles. Considering that people often resist change, an additional challenge will be to properly manage the shift to industry 4.0 so that key employees at the heart of the transformation are engaged and stay on.

What you should do:Despite these challenges, industry 4.0 creates jobs with considerable added value to be performed by more competent employees. You need to take the time to assess the project’s repercussions for employees and manage the change proactively.

In short, sooner or later, you’ll need to look into the repercussions of industry 4.0 on your industry and business. How you undertake the process is up to you.

The experts at Raymond Chabot Grant Thornton can provide support for various aspects: reviewing your business processes, selecting an enterprise resource planning (ERP) system or using advanced analytics for your data, so that you can undertake the industry 4.0 shift while optimizing resource engagement and the return on invested capital.

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Setting Up a Trust to Prepare Your Succession

Trusts are a tax option with numerous benefits to plan the transfer of assets to family successors.

A business transfer is a process that should be initiated several years in advance and generally includes the transfer, first, of knowledge, then power then equity.

Benefits of a trust

Using a trust can be an interesting alternative from a legal perspective. Because equity is separated, it provides better protection. The trust terms include instructions for replacing trustees and identifying the beneficiaries, which is not the case with a company’s shareholders.

When using a trust in a business transfer to family successors, the owner-manager can transfer future value to the children without having to immediately determine how and to whom shares will be attributed.

A trust can be useful if the shareholder is ready to transfer the future appreciation in value to his or her children who are too young to have an interest in managing the business. It can also be a good option if the children aren’t sure yet about whether they want to take over the family business.

Looking at the options

If an owner-manager plans to withdraw from the business and his or her child will be taking over its operation, there are two options:

The family trust allocates common shares to the child and there are no tax consequences on the transfer;

The business exchanges common shares held in the family trust for non-participating shares and the child subscribes for the business’s new common shares.

There are a number of prerequisites to setting up a family trust in an organizational structure, which include:

Analyzing the current organizational structure;

Evaluating the shares of the company where the trust will be integrated;

Setting up the trust;

Preparing any tax forms required;

Reviewing the various legal documents.

Our team of tax specialists can advise you on setting up a trust as part of the transfer of a business to family successors. Contact us today for personalized support in this initiative.

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LiFi: Light-based communication could become common place

The concept of Light Fidelity (LiFi) has existed for some time. It’s now making a comeback and Dévicom is participating in its development. Light-based communication could become common place.

It was Alexander Graham Bell himself who first communicated by light using his invention, the photophone. Bell wondered, “Can Imagination picture what the future of this invention is to be?” His question remained unanswered and the world turned to Hertzian waves for radio communications instead.

It was the development of light-emitting diodes (LED) that made it possible to revisit this technology, with the extensive use of LED devices prompting the industry to develop LiFi solutions.

Closer to home, Dévicom, a Saguenay company, recently entered into a partnership with Longueuil-based Global LiFi Tech. The two companies are collaborating on research and development as well as promotion and client-building strategies.

How are voice and data transmitted by an LED light?

The principle is based on using two main components, a transmitter and a receiver, with an optic channel between them. One of the properties of LED light is that it switches the current off and on at a very high rate, up to several thousand times per second, unseen to the human eye and can therefore be used to transmit information using the computer binary system. When it is on, a LED light emits a (1) bit and when it is off, it emits a (0) bit.

These extremely fast frequency changes (0 or 1) are used to transfer all types of video or audio data over a broadband connection using a LiFi router that transmits electricity and data. The receiver is a mobile terminal (standard cell phone or tablet) that decrypts the light signal using a modulator to transform it into it to a high frequency internet signal.

Can any type of mobile terminal be used?

The cell phone or tablet must have a LiFi receiver or the computer must have a LiFi dongle to establish the connection. Some manufacturers have already integrated this technology into their business processes, it just needs to be activated when the time comes.

With this technological advance, it would be possible to have totally free bandwidth globally (with no licensing cost), without radio waves or electromagnetic interference, as well as more secure communication. Optical waves cannot penetrate through walls (LiFi’s main limitation), which means data is contained inside a lighted room.

Deployment of the technology is part of 5G telephone development as a result of extensive connectivity needs, due in part to the Internet of Things (IoT).

Are there any other benefits to LiFi compared with the highly popular and widespread cellular or WiFi data networks?

Another benefit of LiFi is that it does not use radio frequency (RF) bandwidth. This helps address the problem of RF bandwidth that is almost at full capacity partly because of the immense popularity of audio/video streaming. Not only are WiFi bandwidth frequencies constantly growing, they are unable to meet demand.

LiFi has lower user costs and a DEL bulb can last up to 50,000 hours.

Lastly, data is unpiratable, since light can’t be pirated! Because it is not subject to interference, LiFi makes it possible to use the internet in locations that are not accessible by WiFi.

What are the potential applications?

In the home, each LED light could broadcast different information for each user.

In a hospital, LiFi could be used to communicate patient files electronically, as soon as the patient arrives at the specialist’s office.

At a municipal or RCM meeting, each elected official would have a copy of the agenda, minutes and resolutions as soon as they are connected with a LiFi light. When they leave the premises, the documents would no longer be accessible.

In a plant, LiFi could be used to access the internet or transmit information on various products using a tablet, as soon as a user moves close to machinery (safety and operational rules, etc.).

A first in Canada

In September 2017, Dévicom achieved something special by conducting a telephone interview broadcast by a local radio station using LiFi technology. This technological feat was accomplished by using a USB cable to connect the light sensor/convertor to a regular computer with a telephone using IP (Internet protocol). The LiFi Oledcomm technology was used to make several calls with no dropped calls and with an outstanding sound quality.

The future

Let’s go back to Bell’s question from long ago, “Can Imagination picture what the future of this invention is to be?”. While we may not be able to predict the future, we can picture two practical examples.

In a museum for example, if each work of art had its own LiFi light, visitors could learn about the work of art, when it was created, see a video of the artist and learn graphic details when they approach the work.

In a car dealership, clients could have access to information on a vehicle’s performance, an explanatory video, technical details. The possibilities are endless!

Jean-Luc Doumont is a Business and Communication Strategies Analyst with Dévicom, which handles LiFi infrastructure for Global LiFi Tech, a company deploying this new technology and converting lightbulbs and tablets to LiFi.

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Assurance

IFRS: Potential accounting consequences of the US tax reform

Adviser alert – March 2018

Potential accounting consequences of the US tax reform for IFRS preparers

The Grant Thornton International IFRS team has published IFRS Viewpoint – Potential accounting consequences of the US tax reform for IFRS preparers. The IFRS Viewpoint series provides insights on applying IFRS in challenging situations. Each edition will focus on an area where the standards have proved difficult to apply or lack guidance. This edition provides guidance on the potential accounting consequences arising from the recent reform of the United States’ tax system.

On December 22, 2017, the President of the United States (US) signed into law the ‘Tax Cuts and Jobs Act’ (Act). The Act is a sweeping reform of US taxation which is likely to have a significant impact on financial statements prepared under IFRS for entities with US operations. Furthermore, because the Act became law on December 22, 2017, its effects must be included in interim and annual reporting periods that include that date. The range and complexity of the Act means that companies with US operations need to analyse the impact of the Act in detail. This IFRS Viewpoint addresses some of the issues that entities will face when doing so.